• In December 2023, Total Industry Volume (TIV) increased by 9% MoM to 78,398 units, with passenger vehicle sales grew by 9% MoM to 70,908 units, while commercial vehicles increasing by 12% MoM to 7,490 units

• In 2023, the TIV set a record high of 799,731 units, marking an 11% YoY increase, attributed to factors such as ongoing promotions, improved supply chain efficiency, and the introduction of new models.

• We anticipate the TIV to normalise in 2024 to 650k units (-19% YoY), primarily due to the conslusion of SST exemption in March 2023 and a decline in consumer sentiment towards purchasing big-ticket items.

• Maintain a Neutral stance on Automotive sector with a BUY call for BAuto (TP: RM2.80) whilst a HOLD call for MBMR (TP: RM4.28) and UMW (TP: RM5.00).

TIV rose 9% MoM. The Total Industry Volume (TIV) for December 2023 increased by 9% MoM and 2% YoY to 78,398 units, surpassing November’s figures of 71,908 units. Passenger vehicles sales grew by 9% MoM to 70,908 units, while commercial vehicles demonstrated a 12% MoM growth to 7,490 units. This growth is attributed primarily to the continuation of aggressive year-end promotions. Overall, TIV reached a record alltime high at 799,731 units in 2023, marking an 11% YoY increase over the previous year’s level of 721,177 units. This is driven by i) continued delivery of backlog order eligible for SST exemption, which is ended in March 2023, ii) improvements in the auto-parts supply chain and increased production levels, and iii) introduction of attractive new models.

National car sales. The national car segment witnessed a 15% YoY increase in sales, reaching a total of 481,300 units, commanding a 60% market share. Perodua contributed significantly to the growth, with a 17% YoY increase to 330,325 units, holding a 41% of market share. The most popular models were Bezza, Myvi and Axia. Meanwhile, Proton saw an 11% YoY increased to 150,975 units, securing a 19% of market share, driven by high demand for Saga, Iriz, Persona, and Exora model.

Non-national marques. The non-national segment increased by 6% YoY, achieving total sales of 237,860 units, and securing a 40% market share, including commercial vehicles. Toyota, with models such as Vios, Hilux, and Corolla Cross, remains the top choice for customers, while Mazda's CX30 and CX5 also attract significant attention.

Hybrid & Electric Vehicle. The Malaysian Automotive Association (MAA) classified the segment of electrified vehicles as ‘xEV’, which includes hybrids and full EVs or Battery Electric Vehicles (BEVs). In total, the xEV segment witnessed a 69% YoY increase, reaching 38,214 units in 2023. Breaking down by segment, hybrid vehicles, rose by 40% YoY to 28,055 units (2022:19,988 units), while EVs surged by 286% YoY to 10,159 units (2022:2,631 units). However, it is important to note that the sales data only represent the association’s members and do not include all external EV brands such as Tesla. The development of EVs in Malaysia is being accelerated by the government incentives including full exemptions on import duty, excise duty, and sales tax, along with road tax waiver. Nevertheless, the lack of public charging stations remains a major challenge for EV adoption. This is compounded by long time taken by Suruhanjaya Tenaga (ST) to process the application for Electric Vehicle Charging System (EVCS) licenses that is a prerequisite to set-up the public charging station. Even though ST has reduced the application process to 30 days from 60 days, there are still challenges, including Charge Point Operators (CPO) submissions with inaccurate data, conflicting information, or incomplete details that cause the delays. As of January, there are only 2,020 charging points (1,591 AC and 429 DC). The government aims to have 10,000 EV charging stations by 2025. To achieve this target, Malaysia needs to install around 335 charging points monthly to reach its goal by 2025.

Maintain NEUTRAL. We maintain a NEUTRAL recommendation for the sector, anticipating a normalisation in TIV in 2024. We expect a decrease in the TIV to 650,000 units, reflecting a -19% YoY change. This decline is primarily driven by the end of the SST exemption in March 2023, coupled with a decrease in consumer sentiment attributed to: i) an increase in the SST rate to 8%, ii) the impending luxury tax, and iii) the expected normalisation in petrol prices, estimated in 2H24. Maintain a BUY call on BAuto (TP: RM2.80) supported by stable order backlog. Additionally, we have a HOLD call for MBMR (TP: RM4.28) due to a healthy dividend yield and a HOLD call for UMW (TP: RM5.00) in alignment with the offer price from SIME Darby. It's worth noting that the upside risk to our sector recommendation lies in a resilient labor market, which could sustain buying interest in car ownership.

Source: BIMB Securities Research - 31 Jan 2024